After a disappointing August, existing home sales (completed transactions) “rebounded strongly” in September, rising 4.7 percent, according to the National Association of Realtors (NAR).
Compared to September 2014, sales are up 8.8 percent, and home sales have improved year-over-year for the past 12 consecutive months, but September is unique in that all four regions experienced sales gains.
The current pace of demand
Dr. Lawrence Yun, NAR chief economist, says a slight moderation in home prices in some markets and mortgage rates remaining below 4 percent gave more households the confidence to close on a home last month. “September home sales bounced back solidly after slowing in August and are now at their second highest pace since February 2007 (5.79 million),” he said.
“While current price growth around 6 percent is still roughly double the pace of wages, affordability has slightly improved since the spring and is helping to keep demand at a strong and sustained pace,” said. Dr. Yun.
Days on market and inventory levels
The average days on market rose two days to 49 in September (down from 56 days last September), and the median existing home price rose 6.1 percent to $221,900 which NAR points out marks the 43rd consecutive month of year-over-year gains. Inventory fell 2.6 percent, and is now 3.1 percent lower than a year ago.
Dr. Yun notes, “Despite persistent inventory shortages, the housing market has made great strides this year, backed by an increasing share of pent-up sellers realizing the increased equity they’ve gained from rising home prices and using it towards trading up or moving into a smaller home. Unfortunately, first-time buyers are still failing to generate any meaningful traction this year.”
After a strong improvement in August at 32 percent of all sales, first-time buyers fell to only 29 percent, exactly where we were at this time last year.
Regional performances varied
September existing-home sales in the Northeast jumped 8.6 percent to an annual rate of 760,000, and are 11.8 percent above a year ago. The median price in the Northeast was $256,500, which is 4.0 percent above September 2014.
In the Midwest, existing-home sales climbed 2.3 percent to an annual rate of 1.31 million in September, and are 12.0 percent above September 2014. The median price in the Midwest was $174,400, up 5.4 percent from a year ago.
Existing-home sales in the South rose 3.8 percent to an annual rate of 2.21 million in September, and are 5.7 percent above September 2014. The median price in the South was $191,500, up 6.2 percent from a year ago.
Existing-home sales in the West increased 6.7 percent to an annual rate of 1.27 million in September, and are 9.5 percent above a year ago. The median price in the West was $318,100, which is 8.0 percent above September 2014.
The biggest surprise in this report
According to realtor.com Chief Economist, Dr. Jonathan Smoke, “The biggest surprise in the data was that the first-time buyer share fell to 29 percent from 32 percent in August. But despite that decline, we estimate from the monthly sales data this year that first-time buyers have been responsible for 45 percent of the growth in sales over last year. The September share decline may simply reflect more competition in September by repeat buyers whose closings slipped in August due to the stock market disruptions.”
“Existing home sales are impacted by major stock market declines, since at least one in five buyers funds a portion or all of their purchase with stock or retirement accounts,” notes Dr. Smoke. “But barring stock corrections that reflect real economic downturns — which we are not experiencing — home sales typically return to the prior trend after stock values stabilize.”
Dr. Smoke warns, “Tight supply is an impediment to future growth, and we are not seeing new construction grew enough to fill the void. As a result, we should expect to see tight supply remain a factor for the months and year ahead.”